I think it's supposed to show cascading menu with databases to allow to select the texture easily.

Huh. Now obviously I don't have nearly as much experience with the editor as Jage (mage150), but I've never seen the Editor do that.

Every time I have used the texture selection window, I had to do it in this exact way to get it to work at all - that is, by selecting the textures in the Databases window; only then would they show up at all in the texture selection window.
So far that mostly involved selecting textures for particle fountains; haven't messed much with other classes which involve selecting textures (yet).

The cascading menus work correctly at places where you can select multiple sounds.

"When a human being takes his life in depression, this is a natural death of spiritual causes. The modern barbarity of 'saving' the suicidal is based on a hair-raising misapprehension of the nature of existence." - Peter Wessel Zapffe

True.
They also work correctly anywhere you can select multiple classes (eg. item lists for the Object Generator or Rynn Powerup). But I've never seen a cascading texture selection menu (one listing all the textures from a given database) appear in any context.

I'm inclined to think that the behavior we're seeing is actually exactly what was intended by the devs - since good luck trying to select the right texture from a list of hundreds of names like TextureXXX.
You'd still need to use the Databases window to actually see what these textures look like; at that point, practically speaking, requiring the user to actually select them in the texture preview list makes no further difference.

There's no logical reason to not use at least somewhat descriptive names. The inability to rename textures is also just an artificial limitation of the editor. When you import them, they get the same name as the file, minus the extension.

"When a human being takes his life in depression, this is a natural death of spiritual causes. The modern barbarity of 'saving' the suicidal is based on a hair-raising misapprehension of the nature of existence." - Peter Wessel Zapffe